Tuesday, 25 August 2009

Profits aren’t Everything, People Count Too!

 

      Regular readers will know that as well as creating value, one of the other ideas that underpin this blog is organisational capability, or just human capital.  This concept is about generating competitive advantage and profitability through the intangible value provided by an organisation’s people.  Using people not as resources but as sources of human capital to create value and profit.  But this only happens by putting people first.  By taking a human capital-centric view and developing this capital, knowing that the longer-term payback will be increased profit.

So, I was intrigued to receive information on a new book that I’ve included in my holiday reading: ‘Profits aren’t the only thing, they’re everything’ by George Cloutier.

The key idea of this book is pretty simply: small business owners need to focus obsessively, and exclusively, on profit, in order to stay in and grow their businesses.

Now this isn’t my focus, but I’m not going to argue with the statement.  I can quite see Alan Sugar on the Apprentice, or the BBC’s Dragons agreeing with the idea, and they’ve built up small businesses, not me.

But some of the consequences of this exclusive focus are highly controversial:

“Weekends are for work.”

“Trust no one…  Micromanaging is a good thing  (I’m proud that my employees still complain they can feel me breathing down their necks).”

“Sales people should have 100 percent of their compensation based on pay for performance”

Providing workers “written documents detailing what they failed to deliver..  We call it a ‘Deficiency Notice’.”

“Turnover is a good thing…  The biggest mistake owners make is trying to rehab employees.  Forget it.  Fire first and agonise later.”

“Teamwork is vastly overrated…  [It] simply doesn’t work in most small businesses.”

 

And I have to say I think these ideas are also quite daft.  The problem is Cloutier’s ideas about people:

“You’ve got to be a tyrant…  Let your employees fear and respect you first .”

“I want my employees to do what I say, not what they think.”

“Fear of not getting a paycheck was, is, and always will be the best motivator.”

“During office hours the only growth they should care about is the growth of your profits.”

“Their only stake in your company is making sure they meet or exceed your expectations is they can continue to collect a paycheck.  Trust is beside the point.”

 

And how about this paragraph:

“Two thirds of the business owners we met delegate important tasks, follow up randomly, and whine when their orders are ignored.  They think they should have over their duties because that’s what the HR seminars and management books tell them to do.  But what they’re not admitting to themselves is that delegating is just another word for shirking responsibility.”

 

 

It’s no wonder that later on in the book, Cloutier notes:

“I can’t get my people to do what I tell them to do – We hear this refrain over and over again from our clients”.

 

It’s no surprise that Cloutier’s clients are getting this response if they’re taking his advice!

 

Organisational capability really is more suited to more established and sizeable businesses (or public sector and voluntary organisations).  But smaller businesses absolutely aren’t going to benefit from behaving in the way that Cloutier suggests either.

This isn’t even about putting people first, but keeping some perspective and balance between different factors, as the balanced business scorecard suggests for example.  Cloutier suggests his clients:

“Ignore the human resource gurus who preach patience, calm, civility, and multiple warnings.”

 

I don’t think it’s about these things.  But I do suggest fairness, respect and a bit of humanity.

A good example of a more appropriate and intelligent approach in a smaller, or at least, fairly simple business is Timpson’s, which runs its business very successfully by putting employees and customers ahead of profits (thanks to MOK at the Innovation Beehive for link to this).

Overall though, I did enjoy reading the book.  A lot of the time, it reads like a sales brochure for the Cloutier’s consultancy, but them given his focus, it’s pretty clear why he’s written the book, so you’d be surprised it it didn’t.  But I liked the very frequent stories and anecdotes.  And I did note down a number of ideas relating to my own business (not dealing with companies who read this book and decide not to pay their vendors on time is one!).

 

 

Also see: my post on Whole Foods and Conscious Capitalism on Social Advantage (“profits should not be pursued – they ensue from working towards a higher purpose”).

 

 

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  • 8 comments:

    1. Sheesh! Some of the ideas are simply outrageous! Forget about putting people first, they are not even second or third. Well done Mr. Cloutier.

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    2. Maybe it is just an oddity of north Bucks, Jon, but what has surprised me here is the level of "honour" in the business community. It goes well beyond good business. There is actually a honour code that is noticeable in shop after shop.

      People do do unscrupulous and discourteous things but they are remembered for decades. It seems people enjoy behaving well.

      Behaving badly, I suspect, is more 'because I can'. The system puts people in positions of power and they can use the power as they choose without much effect either way. Without having read the book, the story line goes something like this.

      I got lucky and got into a position where I could run a business. As the luck had little to do with me, whatever I do doesn't mater. So, what will I do? It pleases me to feel in charge and important, so I tried and I found I could convert my earlier luck into this fantasy of mine. See, you can do it too!

      And it follows, we can do whatever we like with any position that we find ourselves in.

      The question of how we find that freedom - that is another question that he didn't address and that few of these books address. That would be a collective story, would it not?
      How a community travelled the road and found greater meaning & well being? Greater friendship and respect with people around them. So it would include their stories too?

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    3. I really find it hard to believe that anyone can be touting these archaic principles at a time when even the government is promoting the need for greater employee engagement as a primary means to improve productivity.

      The obsession with profits, rather than value, is the single main cause of the economic mess we are currently in. The recession (like all others) has proved that super-profits are a fallacy and that profits average out over time. The only way to sustain success is to have engaged people who provide a superior service and that is impossible with the draconian command and control approaches described.

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    4. It's quite hard to swallow. And this guy is considered an ACE?.

      Unbelievable as it may look, I am curious to know, "how come his "toxic" ideas has a following?". I mean, for a consultant to come up with such a controversial and uncharacteristic offerings that goes against conventional wisdom, is totally wacky and perverse. I am interested to know what sort of leaders would go along and what sort of people would work under such C&C conditions?.

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    5. Thanks Sakib, Jo,Bay and Yuvarajah. All great comments.

      Sakib, Jo and Bay, I'm particularly honoured to have your comments since you have such great blogs as your own (even if they're new ones in Sakib's case).

      Yuvaraja, thanks for another great comment. However, I do remember that you've accused me of going against conventional wisdom in the past. Which I took very positively - hopefully correctly (ie I hope you didn't find my own previous comments wacky and perverse!).

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    6. Hi Jon,

      Yes, I did accuse you of going against the grain. But it was in an envious and complimentary way in supporting an alternative strategy that "may" work just as well, if not better, for some companies, industries or leaders.

      So how does Cloutier's ideas or prescriptions differ in content?. One word - values?.

      What do people "really" value and want in life. Should fundamental desire should more or less dictate and shape the way how books,

      To me, as a HR leader and given this time, age and reality check, it sounds absolutely wacky and perverse. But, if he still can find an ardent following for his "unconventional" wisdom and model, then who are we to judge his school of thought?.

      What I think is not important but I am still curious to know how he pull's it off ?. Will it spread like wild fire and be the next silver bullet?.

      As a TQM disciple I know well enough to appreciate questioning status quo, brain-busting and challenging conventional wisdoms. But, if there is one thing I am obsessively and uncompromisingly protective, it is about promoting the values of pursuing balance work-life. I think leaders(consultants included) should be responsible to the eco-system and propagate the concept of value based leadership vis a vis cumulative affect on not just the survival of business but on coomunity, society and future generation.

      To mess with strategies is one thing, but to short change on values is something else.

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    7. Hi Yuvarajah, thanks for the clarification, and once again, I entirely agree. Your values, Jo's honour and Bay's principles seem to be at the heart of the debate here.

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    8. If only there were more companies like Timpson’s. Seth Godin fights also for respect of employees and customers before profit... it is investment in long term profit.

      ReplyDelete

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